Buyers, sellers seeing benefits of auction process

Thousands of homes Chicago have been the subject of foreclosure-related auctions. (BanksPhotos, Getty Images)

Auctions are perhaps most identified with either the very low end of the housing market or its upper echelons.

Thousands of homes in the Chicago area have been the subject of foreclosure-related auctions that have taken place in courthouse lobbies or auction house meeting rooms. Most have resulted in properties repossessed by lenders.

The other end of the spectrum is the rarified air of multimillion-dollar homes that go on the auction block. Michael Jordan's compound in Highland Park failed to sell at auction last year and is listed for sale for $16 million. Two years before that, the auction of a Winnetka mansion, named Le Grand Reve, also did not produce a winning bid.

But somewhere in between those two extremes, here and there, homes are getting sold at auction or even before the event. Several companies are planning residential property auctions involving distressed and nondistressed Chicago residential properties in the next few months, and a company's marketing blitz can be welcome to sellers and produce quick results. For sophisticated buyers, it can prove to be an unexpected path to ownership.

The online auction of a brick home on Dayton Street in Chicago's Lincoln Park neighborhood, one with a suggested opening bid of $1.25 million, wasn't supposed to take place until later this month, but that home is already off the auction sheet after a winning bid came in before the auction.

Despite its prime location, the property's owner decided to go the auction route after having sales contracts on another property fall through three times because of financing contingencies, according to Diana Peterson, president of SVN AuctionWorks, the firm handling the auction of the Dayton Street home.

The owner wanted to limit the hassle of home showings and limit the negotiation. That's because unlike traditional home sales, there is no home inspection after a sales contract is finalized that can help lower a price. It's an as-is transaction. There are no prolonged offer and counteroffers, and no financing contingencies. Earnest money can range from 5 to 10 percent, and most of the commission tied to an auction or pre-auction property is paid for by the buyer.

But the different route to a property purchase doesn't mean there isn't still a bit of give-and-take between the seller and the buyer, negotiation that wouldn't have happened during an actual auction.

Before making a bid, even before seeing the property, the Dayton Street buyer did some due diligence like talking to the tenant in the home to get a sense of the utility bills, the water pressure and other potential problems with the home's systems and structure.

She also talked to the former longtime owner of the home to learn details of what remodeling had been done to the 1876 home, and even contacted a home inspector who wrote a report on the home a year ago.

Then, after seeing the property inside and out, she made a bid, and only a bit of negotiation ensued.

"At a certain point, the seller and the auction house are going to say no," Peterson said.

Peterson credits websites like Auction.com for bringing more consumer attention to the home auction process, and not just for distressed properties. "This is such an easy process," she said. "There's a sense of urgency that an auction inspires. We utilize that to bring the property to market."

Why we move. Some 36 million people 1 and older moved between 2012 and 2013, according to the Census Bureau, and some of the top reasons for those moves were job- or wallet-related.

In its first look in more than a decade at the rationale behind home moves, the Census Bureau found that 5 percent of people said the main reason they moved was to be closer to work or to have an easier commute to their jobs, and 8 percent wanted cheaper housing. Fifteen percent of recent movers wanted a new or better home, down from 21 percent when the bureau asked that same question in 1999.

The results also showed men were more likely to move for job-related reasons than women and